2014 (2) TMI 266 - AT - Income Tax

Unexplained investment - Held that - Merely on the basis of that some figure is written on a piece of paper seized from the premises of the assessee, would not be sufficient to make the addition of that figure in the income of the assessee as unexplained investment - The AO should have placed material on record in support of his contention that the figure represented is not an estimation but it is actual payment of the on-money , since the market value of the land in the particular area is higher than the assessee has reflected in his books of accounts - Decided in favour of assessee. Unexplained cash credit - Held that - Relying upon the decision in CIT vs. Orissa Corporation Pvt. Ltd. 1986 (3) TMI 3 - SUPREME Court - No question of law arises where the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him by furnishing the names, addresses, index numbers of the alleged creditors. In this case, creditors have given confirmation as well as their returns of income were also furnished before the AO - The AO rejected the evidences on the basis that there is a cash deposit of Rs.1 lac before one or two credit entries of loan making to the assessee - The AO has recorded that the loan was provided on 22/11/2006 and on 6/12/2006 and the cash was deposited on 28/09/2006 - The presumption of AO was wrong - Decided in favour of assessee.

Summary

Issues:
1) Addition of Rs.64,84,976/- u/s.69 of the Act for alleged unexplained investment in land.
2) Addition of Rs.4,00,000/- u/s.68 of the Act for alleged unexplained credit entries.

Issue 1:
The first ground of appeal challenges the addition of Rs.64,84,976/- u/s.69 of the Act for alleged unexplained investment in land. The assessee contended that the AO and the ld.CIT(A) misinterpreted the facts and failed to provide any corroborative evidence. The Revenue relied on a seized paper to justify the addition, claiming it represented 'on-money' paid to tenants. However, the Tribunal observed that the Revenue did not present any additional evidence supporting this claim. The Tribunal highlighted that the AO did not investigate prevailing market rates or treat the amount as a receipt or expenditure. Consequently, the Tribunal concluded that the addition was unjustified due to lack of substantial evidence.

Issue 2:
The second ground of appeal concerns the addition of Rs.4,00,000/- u/s.68 of the Act for unexplained credit entries. The assessee argued that the AO and ld.CIT(A) failed to consider crucial details regarding loans provided. The Revenue contended that the assessee did not prove the creditors' capacity or transaction genuineness. However, the Tribunal noted that the creditors had provided confirmations and income tax returns to the AO. The AO's presumption based on cash deposits before loan entries was deemed insufficient. Citing relevant case law, the Tribunal directed the AO to delete the addition, emphasizing that the assessee had fulfilled the burden of proof by providing necessary creditor information.

Conclusion:
The Tribunal allowed the appeal, directing the deletion of both disputed additions. Grounds 3, 4, and 5 were considered general in nature and did not require separate adjudication. The judgment highlighted the importance of substantiated evidence in tax assessments and upheld the principles of burden of proof in establishing transactions' legitimacy.